Fident Capital secured $47.9MM of construction financing for an 8-story, 125-unit multifamily development in the North Park submarket of San Diego, California. The seasoned San Diego-based vertically integrated developer chose a 36-month, 60% LTC loan featuring a built-in bridge loan that drops rate 175 basis points and extends the loan to 48 months upon achieving 25% occupancy. The non-recourse financing allows 100 bps of the interest to accrue which reduced the interest reserve, increased net proceeds, and reduced the borrower’s equity need. Additionally, the lender agreed to waive the exit fee and minimum interest due if refinanced through with an affiliated permanent financing program.
The assignment’s primary challenge involved navigating evolving perspectives on the optimal capital structure among key stakeholders. Initial discussions centered on maximizing leverage at 75% LTC, but once in market, differing views emerged on the appropriate balance between loan proceeds, cost of capital, and execution risk. Fident conducted real-time cost-benefit analyses, evaluating various leverage scenarios and their impact on total borrowing costs and project returns. The final structure — with the compelling rate stepdown and flexible prepayment features — proved optimal for the project’s long-term viability.
Determining the general contracting strategy during marketing added complexity. The sponsor evaluated several execution approaches: self-performance under an owner-builder structure, new GC license for a related entity, or third-party general contractor. Each option carried distinct implications for lender credit assessment and pricing. Fident identified capital sources comfortable with each GC structure and ran parallel analyses to quantify cost of self-performance against the credit benefits available with third-party contractors. The sponsor ultimately formed a newly licensed GC entity to execute with a GMP contract.
Despite these complexities, Fident generated substantial interest. The project’s location in North Park, a long-gentrified neighborhood with exceptional walkability and vibrant atmosphere, provided strong fundamentals. The winning lender demonstrated sophisticated understanding of both the sponsor’s capabilities and North Park submarket dynamics. The rate stepdown structure delivers 175 basis points in savings during lease-up, while flexible refinancing terms enable a seamless transition to permanent financing.
